Leading Chinese Internet search provider Baidu may benefit significantly from the earlier-than-expected launch of an AI-based chatbot Ernie, which is similar to OpenAI’s ChatGPT.

The corresponding expectations provoked a rally, during which the market valuation of the Chinese company increased by $23 billion compared to the minimum recorded last year.

Baidu made its chatbot available to a mass audience of consumers last Thursday, August 31. This event became a factor of influence on the brand’s stock quotes in the United States, capping their growth, which was observed for two weeks against the background of unexpectedly high quarterly results of the company. The digital product of the giant of the Chinese Internet space in the shortest possible time received a user base that consists of 1 million people. Also, this chatbot has rapidly become the leader of the national app rating.

In August, the Chinese authorities approved the public introduction of generative artificial intelligence services. This decision allowed Baidu to launch its chatbot. Also, the actions of the Chinese leadership indicate the beginning of the country’s presence in the area of AI technologies focused on the mass consumption market.

Boris Van, an analyst at Sanford C. Bernstein&Co, says that getting approval for the Chinese Internet space giant is a pleasant surprise since other market participants and enterprises will be able to carry out activities related to the launch of digital products based on machine intelligence later. The decision of the Chinese authorities also creates an advantageous competitive position for Baidu, since its technological development in the form of a chatbot currently exists in a local market where there are no alternative offers yet.

The company’s advantage is a matter of time, but the firm has the opportunity to get the maximum benefit from the distribution of an AI-based digital product among consumers who are limited in their choice. The current state of affairs will allow the Internet giant to significantly improve its financial performance. The temporary nature of the competitive advantage does not mean that after other Chinese developers offer their machine intelligence configurations, Baidu is guaranteed to become an outsider. In conditions of full-fledged competition, the company’s position will depend on the quality of the chatbot it has developed. It cannot be excluded that by the time the AI configurations of other brands appear on the market, Baidu will create new digital products based on machine intelligence.

The hype around artificial intelligence naturally generates an increase in the financial well-being of companies that are somehow concerned with this industry as part of their activities. But in recent weeks, the stock price of these firms has been showing instability. This is because the market is currently trying to assess the financial impact of advanced technology. In the current conditions, the exception is Nvidia, a supplier of chips for artificial intelligence systems, whose share price dynamic demonstrates a steady upward movement.

Hopes for AI have become a factor in the growth of the value of Baidu securities. Since the minimum value of this indicator, recorded in October, it has more than doubled as of the beginning of 2023. Then there were doubts about the ability of the Internet giant to launch its artificial intelligence service, which caused a decrease in profitability.

Baidu’s American depositary receipts are still down more than 10% from their February high, but there are already signs that the reverse trend is about to begin. The volume of call options in the US after the announcement of the launch of the chatbot surged. Investors bet on the future growth of the Internet giant against the background of the news about the appearance of Ernie.

At the same time, some experts speak of a kind of oversaturation of the AI area. According to them, in the current conditions, it is unclear when companies will start to benefit financially from machine intelligence.

Kai Wang, an analyst at Morningstar, Baidu, SenseTime Group, and other firms, said there were no expectations of immediate monetization or intensive revenue growth.

JPMorgan experts claim that Baidu is currently the best investment intermediary for the development of AIGC in China.

As we have reported earlier, Baidu Creates $140 Million Fund to Back ChatGPT-Like Startups.